A peer-to-peer lender offering a high-net-worth pawnbroking service has been given the green light by regulators to market a specialist type of Isa to investors.
HNW Lending connects borrowers with valuable assets to investors seeking a greater rate of return.
Borrowers must hand over their assets, which in the past have included classic cars, planes or wine collections, to HNW. The peer-to-peer lender has a network of custodians that hold the assets with borrowers unable to use them until debts have been repaid.
Investors receive returns of between seven per cent and 15 per cent each year, depending on their risk appetite.
Read more: These P2P platforms lent nearly £3bn in 2016
Today, the Financial Conduct Authority (FCA) and HM Revenue & Customs (HMRC) gave HNW the approval to offer the lending as part of an Innovative Finance Isa (Ifisa). This means interest and capital returns can be paid tax-free to investors.
HNW founder Ben Shaw said:
Unlike some of our competitors we take possession of valuable physical assets belonging to the people we lend to or put a charge on their property at the Land Registry so that if they default in paying back their loan or interest we can sell those assets to repay investors.
The Ifisa was launched in April 2016 and allows individuals to use some or all of their annual Isa investment allowance to lend funds through the peer-to-peer lending market. To date, there are only eight Ifisas in existence.
HNW offers individual loans of between £50,000 and £1m, with investors in its Ifisas making a minimum annual contribution of £5,000 per loan.
Shaw added: "We have a proven track record of providing strong returns to the investors who fund our loans, and we have not lost any capital or interest to date."